With the season behind us, now is a good a time to consider what we gleaned from this year’s political party conferences in Bournemouth, Brighton and Manchester, and the implications for residential property investors.
Aside from the usual political theatre, there were some useful clues to the general directions of policy. Housing certainly matters more politically than it did a year ago, and for that we must thank millennials. The vicious circle of ‘they don’t vote so why focus on them’ has been broken, and the battle has commenced on whose policy can tempt these young renters, and would-be first time buyers, into their camp.
The Lib Dems, perhaps keen to get their new leader off to a safe start, didn’t really offer much new in Bournemouth. Vince Cable emphasised housing inequality, ticking the ‘millennials’ box. Much of the rest of his speech, however, was established party policy and Cable rhetoric.
“We must end the stranglehold of oligarchs and speculators in our housing market. I want to see fierce tax penalties on the acquisition of property for investment purposes, by overseas residents. I want to see rural communities protected from the blight of absentee second home ownership, which devastates local economies and pushes young people away from the places where they grew up.”
Whilst that will go down well with the party’s 12 MPs, mainly in London and rural seats, it didn’t really offer much for the rest of the country, and the argument that speculators are buying up central London property to leave empty has to large extent been discredited recently by research commissioned by London’s Mayor.
Cable did promise a doubling of annual housing supply to buy and rent, but didn’t really explain how that would be achieved, beyond garden cities and garden villages springing up in places where demand presently outstrips supply. However, many of the places where demand outstrips supply are already urban and not where a garden city or village is going to pop up any time soon.
Getting the election out of the way seems to have, if anything, emboldened the Secretary of State for Communities and Local Government, Sajid Javid MP. He was at his most overt in his conference speech on the government’s efforts to increase housing supply. It was always the plan to give government policy on housing supply more teeth via the housing white paper. Specifically, the policy of standardising housing need assessments, and then holding local authorities’ feet to the fire through the Housing Delivery Test, will make life uncomfortable for many councils in the southern half of the country. See: Housing_Need_Consultation_Data_Table.xlsx
To be so overt about this pre-election would have been unthinkable, but now Javid can call a Nimby a Nimby and get away with it. Government is determined to increase supply and for investors that may mean more opportunities, but eventually also more homes.
As well as delivering more housing, quality is rising up the political agenda. The impact of the tragedy at Grenfell Tower has been felt beyond the social housing sector. Politicians are very much focused on ensuring that voters not only get a home, but a decent one, which provides greater security for those that want it.
For private-rented sector policy, politicians are increasingly looking north or west. Devolution has created very different regulatory regimes for private renting in the various constituent countries of the UK. Scotland, Wales and Northern Ireland have pursued different policies and for the politician looking to change things in England, they offer an example of how things can be done differently.
Longer tenancies are therefore something that is on all politicians’ to-do lists. For Conservatives, it is something to encourage, and therefore talk of incentives at Budget time. For Labour, something to regulate to make happen.
And what of Jeremy Corbyn and the prospect of rent controls? Perhaps not a surprise for it to be couched in such anti-investor terms in his speech. Some form of rent controls has been party policy for a few years now though. The party went into the election of 2015 promising a three-year tenancy, with index-linked uplifts, and reversion to market at the end of the three years. That was essentially the policy for the 2017 election as well. What Corbyn’s Brighton speech seemed to signify, was a move towards a more Scottish model of tenure reform. So, a policy of open-ended tenancies, which will go live in Scotland in December. As for rent controls, it will be local government that opts for them, rather than national government imposing them nationally; a nod to Scotland, which allows councils to introduce rent pressure zones.
Were he to gain power, Corbyn’s policy of rent controls may therefore have very different impacts across the country on investors. In Tory heartlands, perhaps no impact at all, but in Labour’s urban heartlands, particularly where it has the powerbase of a Metro Mayor, these may be the focus of rent controls.
So, what can we conclude from party conference season for investors? As always there is a lot to play for. Increasing the quantity of housing remains critical and the best hope of delivery is still the housing white paper. Delivering on the white paper is therefore critical, not only for resolving the nation’s housing crisis, but the party’s political chances. Quality is rising up the agenda for all parties, and for investors, particularly small investors, that may mean some additional cost.
Tenure reform will happen, but the two main parties offer very different route maps. The Conservatives, using incentives, Labour using regulation. As for rent controls, we do not have a Corbyn government, but if we did, the intention seems to be to give local authorities the option of rent controls, and the political make-up of your local council could therefore be the deciding factor in whether specific investments you own are affected.
